How to start a car dealership in South Africa

How to start a car dealership in South Africa

Almost everyone uses a car for their daily travel, those who don’t; aspire to buy them at some stage. This is a step-by-step guide on how to start a car dealership in South Africa.


A lot of people deem cars to be nearly as valuable as houses, cars are super valuable. This means that the future of this industry is great as there will always be demanded; provided you are in the right location.

This business has very high barriers to entry, the costs can be prohibitive for many budding entrepreneurs. This has both advantages and disadvantages, the main advantage being that you will likely face very little competition.

Choose the right location

The right location can make or break your business; the right location is where there is demand. Demand plays a very important role in where you choose to locate your car dealership. This means that you have to do a lot of market research to determine whether there is demand or not.

Your market research should start by studying the demographics of your location and the actual demand for cars. Not forgetting the competition that may already exist, most people don’t set up car dealerships in very low-income neighbourhoods. Assess the demand for the types of cars you want to sell, are you planning to sell new or used cars and a specific brand? All this will help you determine the right location.

Decide on what type of dealership you are going to open

You can open a car dealership that sells all car brands or you can open a franchise. I would not encourage you to open a franchise, the process to being approved is very rigorous and yet you have very little freedom with what you can do with the business. The main benefit of opening a franchise is that you will have credibility in the marketplace. This credibility might help to generate more sales.

You should also decide on whether you are going to sell new or used cars or both. Selling both new and used cars can be very expensive, it will require a lot of money in start-up costs. Second hand cars are easier to sell and will make you a lot more money in the long run because they will need to be repaired a lot more. Which might kickstart your car repair/service business.

Opening a repair/service business is a great way to get business continuously from people who initially bought a car from your dealership. Profit margins on the actual sale of the vehicle might be low.

Register your business

You should register your business with the CIPC, it will be registered as a private company and will be responsible for its own liabilities amongst other benefits. In South Africa, you need a dealer’s license, which allows you to buy and sell cars. You will also need to have an authorised financial services provider if you want to provide in-house financing advice. This is something that you should be looking to do as it is a good source of additional revenue.

Buying second-hand cars

The best place to find second hand cars is an auction, you will get to see a lot of different cars that are priced to sell. You will also be able to check out the condition of these cars, this will make it much easier for you to choose the best ones for your dealership at a decent price. Some of these cars might need repairs, you can do repairs and add the cost as part of the selling price.

Occasionally, there are people who will walk up straight to your dealership and tell you that they are selling their car. These people are usually desperate to get rid of it, which makes it easier to negotiate a fair price for the car. A lot of car owners value their car more than it’s actually worth.

Marketing your car dealership

Marketing cars is not as difficult as marketing other products, with less competition and a high demand for cars; you will have it easier than most businesses. The best way to go about marketing your car dealership is by hiring sales agents and paying them a commission on sales. This will reduce your overhead costs while simultaneously increasing the reach of your business and getting you more customers.


This was a guide on how to start a car dealership business in South Africa. Do you have any thoughts or questions? Comment below.

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This Post Has 4 Comments

  1. Which law states that ” In South Africa, you need a dealer’s license, which allows you to buy and sell cars.”? With a licence there are certain privileges but I cannot find any law that says to buy and sell cars you need a dealers licence.

  2. Do you need to study for it.If so,what/which course does one have to apply for?

  3. How does one get to apply for a dealer’s license in RSA?
    I would like to start trading with vehicles and possibly open a dealership.

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